Is Starting A Business Safer Than Your Job?

What's Better - Getting a Job or Starting a Business?

With a slow economy, many people have turned to entrepreneurship as a means to pay the bills. Which begs the question, what’s better today — getting a job or starting a business?

We dug deep to find out the numbers and have compared the risk of starting a business to keeping a job. If you’ve ever thought about starting your own company, take a look at our graphic below to help decide if entrepreneurship is right for you.

In 2008 on average 2,356 people went into business for themselves every day.

Their ventures accounted for 78% of U.S. businesses

WHAT ARE THE OPTIONS?

SELF-EMPLOYMENT
There are only four paths toward business ownership:

Start a business from scratch

Become a consultant

Buy a non-franchise business

Buy a franchise (the most secure choice)

Among the fastest-growing industries are:

Web search portals (41.2 percent)

Internet service providers (16.6 percent)

Nail salons (18 percent)

Electronic shopping and mail-order houses (12 percent)

Recreational vehicle dealers (12.1 percent)

Landscaping services (11.1 percent)

WEIGHING THE RISKS | STARTING A BUSINESS

EMPLOYMENT

Working for somebody else is like renting an apartment

An employee has only one revenue stream (the employer)

Job stability is never guaranteed: “one may have no idea that headquarters is considering selling the whole operation”

Out of 15.4 million displaced short- and long-tenured jobs (from 2007 through 2009):

6.9 million workers were displaced from jobs they had held for at least 3 years (long-tenured)

8.5 million persons were displaced from jobs they had held for less than 3 years (short-tenured)

Reemployment figures:

60% of displaced workers were reemployed in January 2008

50% of displaced workers were reemployed in January 2010

31% of the re-employed’s jobs end in less than a year

65% percent of the re-employed’s jobs end in fewer than 5 years

SELF-EMPLOYMENT

Working for yourself is like owning your home

The self-employed has potentially several revenue streams (clients, product lines, business offshoots, etc.)

With X number of clients a self-employed person could lose Y number of clients and still have a stable business

35% of new businesses that have at least one employee, last for two years (business may have been profitable at the time the doors were closed)

35% of new businesses that have at least one employee last for five years

Non-franchised businesses are closed within 6 years

Non-franchised business start-ups have a 62% failure rate

Franchises are still in operation after 10 years

Franchises have a 90% success rate

To reduce risk:

Before you quit your job, make sure you have at least three months of “security money” for personal bills

Securing first clients before leaving old job

Do what you can afford with your own money

Use other people’s money

INCOME

SELF-EMPLOYMENT

Slow annual earnings growth for the first few years grow faster after a critical number of years

With a franchise, the time frame to reach profitability is shorter than it would be with a non-franchised business

Your reward is more proportional to your effort. You contact with the market directly so any extra value you provide is more likely to be rewarded

EMPLOYMENT

Data from the 2008 Current Population Survey indicate that the median earnings of the wage-employed are $26 per year lower than the median earnings of the self-employed ($30,986 versus $31,012)

When you are in a corporate environment, providing twice as much value doesn’t necessarily mean getting twice as much reward

AGE

SELF-EMPLOYMENT | STARTING A BUSINESS
No matter your age, no matter your experience, you can be a successful entrepreneur if you have a good idea and are willing to put in the work to make your business a success

Unincorporated Self-Employed by age (2009)

16 to 19 years ……………………………… .8 %

20 to 24 years ……………………………… 2.7 %

25 to 34 years ……………………………… 13.9 %

35 to 44 years ……………………………… 21.9 %

45 to 54 years ……………………………… 28.0 %

55 to 64 years ……………………………… 21.4 %

65 years and older ……………………… 11.3 %

Incorporated Self-Employed

16 to 19 years ……………………………… .1 %

20 to 24 years ……………………………… .9 %

25 to 34 years ……………………………… 13.6 %

35 to 44 years ……………………………… 23.5 %

45 to 54 years ……………………………… 32.7 %

55 to 64 years ……………………………… 23.8 %

65 years and older ……………………… 8.6 %

Self-employed workers tend to stay in the labor force longer than wage-and-salary workers

More wage-and-salary workers switch into self-employment later in life than vice versa

EMPLOYMENT

while 16 is the minimum age for most non-farm work, minors aged 14 and 15 may work outside of school hours in certain occupations under certain conditions

Older job seekers are having a significantly harder time reentering the workforce than younger adults

GOVERNMENT PROGRAMS

SELF-EMPLOYMENT

Self-employment allowances are the same weekly amounts as the worker’s regular unemployment insurance benefits

Participants work full-time on starting their business instead of looking for wage and salary jobs

There are programs to encourage entrepreneurship. In many instances, these programs target economically disadvantaged demographic groups.

One-third of program assisted businesses are short lived, typically one year

Programs aimed at the long-term unemployed, usually established in periods when the economy is strong are effective

Some economically disadvantaged demographic groups’ prospects in the labor market are lackluster

Training programs should not be used as a panacea for reducing unemployment–it usually doesn’t work, especially if the economy is not growing

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I found this article to be very informative, and the presentation of the information well balanced. As a person who has set his feet firmly on the road of entrepreneurship, my opinion is that it is more risky to stake your future on the wage/salary employment option. The indicators seem to point to the running down of the system we’ve all grown up in, and been trained to take part in from the start of our lives. Economics may not be the most stimulating and dazzling of studies, but the study of it would probably give a clearer picture of why we’re faced with mounting living costs and surging unemployment.
So, be encouraged, friends. Learn about the new economy, keep cultivating your set of valuable skills, and let’s keep communicating positively. We’ve learned about the power of cooperation. Now, maybe a little more self-determination.

Hasseim, I think you make some great points. I think the bigger picture of this graphic is to take control of your future. Entrepreneurship might not be for everyone, but for many, it’s a better option.

Thank you, Dan, for posting this insightful infographic. I work with the Campaign for Free Enterprise, a project of the U.S. Chamber of Commerce, and we believe that entrepreneurship fosters vital job creation and product innovation. With unsustainable unemployment rates, more and more Americans are turning to entrepreneurship as a means of paying the bills and Lendio’s infographic is of great value to those looking at their employment prospects. I will be sure to share your article with our fan base.

While the article is focused on the US market, the same applies to the UK with slightly varying figures.

I have actually managed to be both self-employed and employed, it works great for the fact that I don’t have enough capital to go it alone.

I also think 3 months worth of capital isn’t enough, most people who go self employed have a lot more than just 3 months worth of capital. I’ve asked various people how they achieved this and most have told me they re-mortgaged their property in order to raise the capital to operate a company.

One man however, how is my inspiration, did similar to what I am doing, working for a company whilst building up a stable company. I find coming from a poor background and being so young (23 and started the company when I was 21), this option works well as I don’t have to take as many risks and capital will slowly increase.

Some find living with their parents is a good way to help them start a company as their living expenses are a lot lower, I didn’t have that option for personal reasons so my living expenses are a lot higher – another reason why I choose to be self-employed and employed full time.

If you wonder how I manage to do both, I work from home the majority of the time and sometimes I pay visits to the office. I deal with most of my clients by e-mail and respond to all e-mails within 2 hours in office times.

It would be nice to see a diagram showing the 3rd option, as I guess these figures will be margin compared to the other figures.

Nice ideas, but I think some things are still missing when comparing the income of self employed and working for someone else. Self employed person uses the car of his company, fuel is not his, but company’s, phone, internet and many other daily needs are paid by his company, not by himself. That’s not such a small sum in a month.

Good points. We actually thought of including more of those points, but that would have made an entirely new graphic in and of itself. This one was more about the risks, and we are planning on doing one that compares the true costs of each. Thanks for stopping by!

starting a buss. is the way to go
been in buss from 1999 until now
you will fail if you listen to foolish people
follow your dream.its like driving a car
you go where you need to go,you don;t
catch the bus and let someone drop you off
they may not pick you up.smile

Loved the article. I actually finally went out on my own a year ago and I LOVE IT! Although I have to say, having 3 months of safety net would be what I would recommend as a minimum, especially if you have a family. Within the first years time I had no idea what to expect as far as sales (My company does custom web development) When I first started business was booming. However 7 months later it slowed to a disturbing crawl and I have been fighting to keep my head above water for the past month as I have finally eaten through my safety net. But things are starting to look up again. You just have to persevere.

But even with that, I have to say that starting my own company and no longer having to sit in a box, in a room full of other people in boxes has been a dream come true.

I Started out myself after losing my job and been unemployed for 4 months. There was no work around and I was not one of these people who could sit around doing noting claiming off the state. I dont earn as much as I did employed but I am working contributing and it leaves me time to spend with my family and put food on the table

For me, common wisdom isn’t all it’s cracked up to be. I’ve been an artist all my life, but of course I always heard I couldn’t make a living at that, that I would have to have something “to fall back on.” So for years I was a frustrated artist making art when I could, wasting my energy working for other people for less than I was worth. Back around 2004, I knew the economy was headed for trouble; it began to feel to me as if trusting someone else for my sole source of income was putting myself too much at their mercy, which is the way the big corporations like it – you’ll jump through more flaming hoops that way. I started my own part time business doing window splash painting. Then I started going to school to learn sign graphics. I’ve had my business, The Window Goddess Sign Painting and Window Splash for 7 years now. In July of 2010, I was laid off from my full-time job of 14 years. I never missed a day’s work, never filed for unemployment. I just went to work doing the artistic work that I had been doing part-time. When the “real” job got jerked out from under me, I “fell back on” my artistic ability. I think our notions of security are backwards, too – you can create much more security working for yourself than you can working for a job where someone else holds the reins. I have intentionally low overhead. I think the current economy is a breeding ground for entrepreneurs. The corporate mentality says get people to do as much work as possible for as little pay as possible, with no job security. Well, all you have to do is figure out that if you already know how to work long hours for little pay and no security, you might as well be doing it for yourself – that is after all exactly what is required for a new business. I say get out from under the big corporate rock and spend your energy working for yourself – it’s far more rewarding.

I started my own business as I really struggled to find a job after having my first baby. I kept financial rsik to a minimum and tend to think that even if my business doesn’t quite work out, the skills I’ll have aquired and the contacts I have made could help me be more employable in the future.

While persistence is very important and key to achieving many things in life, you also have to know what you’re doing. There are self-employed folks out there that can be very closed minded, and will run their business into the ground because of pride. You really should stay open minded, seek others opinions, and get help from some successful people who have worked in your field.

A great post and some interesting info. I am in the UK but feel sure the stats would be similar. I have tried franchises and opening highstreet businesses but believe the only way to go is online and start small, build the business before leaving employment.
Regards
Paul

Starting your own business is an adventure, and one with no promises. The best you can do is be at the right place at the right time with the right product,. That is why I am attending the Funding, Discovery and Monetization Conference, September 12-13 at the San Diego Convention Center (www.coastalshows.com).This event is a MUST ATTEND for leaders from the digital media community, angel and venture funds as well as investment firms looking for opportunities in the social media,applications, platforms and mobile digital market. The AppShow is providing a special discounted rate for incubators/ hatcheries and start-up companies as a way to support their entrepreneurial efforts.

I talked to a bunch of my friends who have their own small business and almost all of them told me its much easier and cheaper in the long run if I buy into an existing business now rather than wait and hope for my own start-up to work.
I’m an engineer working for a medium sized company and I dont see this company doing very well in the near future. They have been putting people off and although i think my job is safe, its an opportune moment in my life to take the leap to own my own business and run it well. Good luck to all the others on here.
Heres the business website I am thinking of buying..http://listabiz.com/business-for-sale/subway-franchise-for-sale-in-chester-county-owner-financing-available/

You drive a solid point home with this post that I have believed for quite awhile. I am working toward being self employed now. It finally sunk in with me that I can’t blame anybody else but me for my financial situation, which is gradually improving.

Robert Kiyosaki’s “Rich Dad, Poor Dad”, and “Cash Flow Quadrant” along with Dave Ramsey’s teachings and radio show have made a huge difference in my mindset.

Your post proves out the numbers. We have to be smart about becoming self employed, but we all need to strive for it by finding a way to truly become valuable to the marketplace with our own skills.

We can use skills we have or develop new ones, but we need to build multiple streams of income with our own skills.

Great analysis Dan. Having your own business does come with many risks, however the rewards are well worth it for those willing to stick it out. I have owned several businesses and I have also been an employee. I can tell you that owning a business for me is much more rewarding in job satisfaction and financially. There have been times when I wanted to throw in the towel especially in 2009-2011 when things got pretty tough, however I plowed ahead and things worked out fine. There are many opportunities for people to start their own business but finding a passion for what you do is critical to success. If you don’t love what you do then you will fail. On the other hand there are very rewarding jobs out there that pay well and often come with less risk. However if you want to make $250K+ good luck, those jobs are few and far between. I guess you can tell that I truly believe in the entrepreneurial spirit. Many thanks for your perspective on this topic.